An interesting view on the financial crisis in the U.S.
American attachment to instant gratification is strong. So is the pressure to pass the bailout. But left unchecked by self-restraint and honest reckoning, both forces may lead America to repeat, on a grander scale, the same sort of error that got us in this financial mess in the first place.
Yves Smith is arguing that policy that avoids recession, if overdone, can bring a meltdown. Further recession avoidance may make the ultimate adjustments even harder.
Agreed, recession can force markets to readjust overvalued assets, and now might be the time for that. But should the Fed. avoid future temptations to keep growth and employment healthy?
My own problem with the bailout is that it rewards bad decisions by the wealthy, and asks tax payers to pay for it. Not only a bad precedent, maybe just a delay of an inevitable slowdown. Better to let the Fed. and the treasury deal with this problem as they may. Maybe it will lead to recession, maybe to excessive inflation. Let’s just get it over with.
The bigger problem with all of this is that the US government is quite revealed as a pawn for the rich of America. The voters are heard for now, but–watch–a bailout will get agreed on, once they figure out how to make it palatable.